ETLA Discussion Papers, The Research Institute of the Finnish Economy (ETLA) 778

Abstract:

The emergence of the current intangible-intensive economy does not only mean enormous opportunities but also serious challenges in different dimensions. These challenges are mainly due to some fundamental differences in nature between physical assets and intangibles. The very same reasons that explain the vast potential of intangible assets also constitute the main reasons for inadequate applicability of conventional measurement and valuation approaches. As a consequence, it is believed that accounting information fails to capture and reflect a company’s value creation attributable to intangibles. And when the information provided by accounting fails to appropriately reflect the impact of intangibles on the company’s current and future performance, investors will not be able to make efficient resource allocation decisions. Many empirical findings suggest that, despite the poor visibility, financial analysts do take intangibles into account and ascribe considerable value to them. The primary source of the necessary data for the current study consists of twelve semistructured interviews with 12 financial analysts active in Finland. One of the findings from the interview survey implies that although the respondents in general acknowledge the importance of intangibles in company’s value creation, the types of intangibles and the degree of importance attached to various types of intangibles tend to vary among respondents.